Financial Awareness
A More Complex
Financial World
Financial Education:
What is it?
Page 3
Page 4
A Brief History Of
Financial Education
in Turkey
Visa Europe Initiatives
in Turkey: Education
Makes a Difference
Page 5
Page 6
The Road Ahead
An International
Perspective
Page 7
Page 8
What Next?
Conclusion
Page 9
Page 9
2
Within Turkey’s private sector, Visa Europe has become
established as one of the leading players in the field of financial
awareness. Since 2006, the company has hosted a series of
financial literacy conferences, which have drawn attention to
the issue and provided a forum for discussion amongst related
stakeholders. The most recent was held in Ankara in 2011, where
the participants included several government bodies, banks,
consumer groups and academics. This paper summarises some
of the perspectives and insights.
3
A More Complex Financial World
It is now widely believed that, in order to protect the
long-term sustainability of any economy, it is important
for consumers to be equipped with the necessary
financial knowledge and skills to make informed, sound
decisions.
Over the past two decades, Turkish
consumers have been faced with
a dramatic increase in the number
of new financial products and
services available to them, ranging
from defined contribution private
pension schemes to new types
of loans, alternative investment
instruments and a wide selection
of innovative electronic payment
instruments. In general these new
financial choices have met with a
remarkable level of interest.
For example, since the ‘Individual
Pension System’ was introduced
in late 2003, almost 2.5 million
Turkish citizens have signed up.
Also, since 2003, around one
million consumers have taken
out a mortgage to finance their
property purchases. At the same
time, people are using online
banking services to invest in
various types of fund and to trade
in stocks and bonds (even though,
just a short time ago, the only
such investment option available
to most people was a fixed-term
savings account).
But, of all the new financial
products now available, the most
widely held and frequently used is
surely the electronic payment card.
Thanks largely to the innovative
loyalty programmes and benefits
packages developed by Turkish
banks, the number of credit cards
grew from 14 million in 2001 to 47
million in 2010 – making Turkey
one of the largest electronic
payment markets in Europe.
Yet against this backdrop, there is
the question of whether individuals
have a sufficient understanding of
these products, and whether they
are truly capable of managing the
inherent risks or taking advantage
of the related opportunities.
Indeed, the global financial
crisis has probably encouraged
all consumers to reassess their
own understanding of economic
principles and reconsider the type
of risks that can be associated with
major financial decisions.
It is now widely believed that, in
order to protect the long-term
sustainability of any economy
(and maybe even the global
economy), it is important for
consumers to be equipped with
the necessary financial knowledge
and skills to make informed,
sound decisions. It is therefore
no surprise that the concepts of
‘financial education’ and ‘financial
capability’ are gaining momentum.
Internationally, the OECD is
leading the way, monitoring global
trends and finding ways to share
best practice. And such concepts
are also attracting more attention
in Turkey.
4
Financial Education: What is it?
The OECD defines financial education as “The process
by which financial consumers/investors improve their
understanding of financial products and concepts
and, through information, instruction and/or objective
advice, develop the skills and confidence to become
aware of (financial) risks and opportunities, to make
informed choices, to know where to go for help, and to
take other effective actions to improve their financial
well-being and protection”1
Under the terms of this definition, the type of training and
information typically provided by either banks or government
agencies cannot really be considered as financial education – and
nor can the marketing campaigns or consumer information that
generally accompanies a financial product.
Instead, it is thought that a complete and effective financial
education programme should cover three basic areas:
•Budgeting: Skills to monitor/track
individual income and spending,
to ensure that one has sufficient
funds to spend and to save.
•Credit and borrowing: The ability
to understand and differentiate
between different types of loan,
(including knowledge of the
respective costs and the relevant
concepts/terms), to ensure that
one is able to choose the most
appropriate product, and to
borrow a manageable amount.
•Saving and investing for retirement:
Knowledge of different investment
options, in order to plan for
retirement, and to ensure that one
does not experience a material
reduction in living standards upon
retiring.
1 - OECD, “The OECD Project on Financial Education”, http://www.financial-education.org/dataoecd/8/28/44409678.pdf
5
A Brief History Of Financial Education in Turkey
Visa Europe Turkey has been organising financial
literacy conferences since 2006. This series of events
has helped to draw the attention of Visa Europe’s
member banks, along with the academic community
and various government agencies.
The concepts of financial
education and financial literacy
are relatively new to Turkey
and, consequently, activities to
date have typically focussed on
awareness building.
Some consumer groups do, as part
of their responsibilities, inform
consumers about various financial
topics. But they tend to do so from
an issue-specific perspective,
and rarely emphasise the need
for comprehensive or in-depth
financial education. Government
organisations are also quite new
to the concept, but the Central
Bank of the Republic of Turkey
has led the way. For example, it
partnered with the Capital Markets
Board to host an international
conference in March 2011,
titled “Financial Education and
Financial Awareness: Challenges,
Opportunities and Strategies”. The
event was a success, attracting
broad participation from various
authorities and experts from
Turkey and overseas. In his closing
remarks, the then-Governor Mr
Durmuş Yılmaz drew attention
to the fact that there is still a lot
of work to do to build awareness
about the issue and its importance.
Visa Europe has been campaigning
on the issue for several years.
The company has consistently
emphasised the importance of
financial education, and has put
considerable effort and resources
behind its related activity. As Berna
Ülman, Visa Europe Senior Vice
President and Regional General
Manager: “As the leading player in
the electronic payments industry,
we have been encouraging our
sector and our stakeholders to
engage in the subjects of financial
literacy and financial awareness.
And, in total, Visa Europe has
invested more than 7 million in
this area.”
For example, Visa Europe Turkey
has been organising financial
literacy conferences since 2006.
This series of events has helped
to draw the attention of Visa
Europe’s member banks, along
with the academic community
and various government agencies.
The company has also supported
various consumer groups with
their financial education activities,
and has collaborated on certain
initiatives.
2 -ERA Research, “Young Generation Research”, December 2009, p 39 and p 44
In 2009, Visa Europe then
launched an entirely new type
of initiative in partnership with
the United Nations Development
Programme (UNDP), the Ministry
of Development and Habitat
Center for Development and
Governance . Called ‘I Can
Manage My Money’, this public
training programme is based on an
innovative peer-education model,
and aims to improve the budgeting
skills of people aged between 15
and 30 years. So far, more than
7,600 trainees have benefited from
the training.
A recent research study
commissioned by Visa Europe
in Turkey2 came up with some
interesting findings. According to
this study, 97 per cent of young
people make important financial
decisions without consulting
an expert. 87 per cent of them
are not saving for near-term
financial needs such as education,
transportation and housing. And,
among those who do save, only
a very small minority keep their
money in the banking system. This
suggests that the level of financial
awareness among the youth is
very low.
6
Visa Europe Initiatives in Turkey: Education Makes a Difference
Visa Europe’s experience indicates that education can
make a real difference. Research has been conducted
to measure the effectiveness of ‘I Can Manage My
Money’, and this has revealed some interesting results.
Visa Europe’s experience indicates
that education can make a real
difference. Research has been
conducted to measure the
effectiveness of ‘I Can Manage
My Money’, and this has revealed
some interesting results. Emre
Erdogan, Managing Partner at
Infakto Research, explains: “Before
the training, 56 per cent of the
participants considered themselves
to be knowledgeable about
personal finances. But, after the
training, this figure increased to 84
per cent, which is a good indicator
of the programme’s positive
impact on the perception of its
participants. ” 3
Whilst this is encouraging in its
own right, the real measure of
success is in any behavioural
change. As Mr Erdogan points out,
‘I Can Manage My Money’ scored
positively in this respect too: “After
the training, the proportion of
people who do not have a personal
budget reduced by 50 per cent. In
other words, participants became
more financially-disciplined.”
56%
84%
Part of the success of this modest
programme is certainly due to the
know-how, the resources and the
effort that each partner puts into
the project. As Hansin Dogan,
Director of Private Sector Projects
at UNDP, explains, “Aside from
being the first financial awareness
project in Turkey, ‘I Can Manage
My Money’ is being carried out
through the partnership of a
private sector entity, an NGO,
a government agency and an
international organisation.”
At the outset, project partners
decided that “one of the main
targets of the project is to come
up with a policy proposal so that
financial education is included in
national schools’ curriculum.”
Creating shared value and ensuring
that solutions are sustainable are
key factors of such a partnership.
As Fiona Wilkinson, Senior Vice
President at Visa Europe explains:
“Financial education is a core life
skill that all young people need.
It benefits society as a whole as
well as the individual. We believe
that programmes like this should
become a sustainable and integral
part of youth education, and that
they should be supported by a wide
range of bodies in civil society, not
just the private sector.”
The preliminary results of the
project are certainly encouraging
and suggest that a more in-depth
financial education programme,
with a wider participation of
stakeholders, could produce
even greater impact. The OECD
recommends that “Government
and all concerned stakeholders
should promote unbiased, fair
financial education”4 . It goes
on to emphasise the need for
cooperation between government,
consumer groups and the financial
services sector in order to develop
and implement a sustainable
financial education strategy.
Emre Erdogan, Managing Partner at Infakto Research, explains: “Before
the training, 56 per cent of the participants considered themselves to be
knowledgeable about personal finances. But, after the training, this figure
increased to 84 per cent, which is a good indicator of the programme’s
positive impact on the perception of its participants.”
3 - Infakto Research Workshop, “I Can Manage My Money” project impact analysis, April 2011, p 12 - 13
4 - OECD, “The OECD Project on Financial Education”, http://www.financial-education.org/dataoecd/8/28/44409678.pdf
7
The Road Ahead
The most recent Visa Europe
conference on financial literacy
aimed to provide a platform for
various stakeholders in Turkey to
discuss how this could be achieved,
and to help open the way for wider
cooperation in the field. Held in
Ankara in 2011, the participants
included several government
bodies, consumer groups and
academics, as well as a range of
Visa Europe’s member banks.
The consumer is, of course, at the
centre of this debate. Explaining
the findings of the ‘Country
Economic Memorandum on
Domestic Savings’, jointly prepared
by the World Bank and Turkey’s
Ministry of Development, Ms
Kamer Karakurum-Özdemir,
senior economist at World Bank,
described the ways in which
low financial literacy levels
affect consumer behaviour and,
ultimately, the wider economy:
“Our research has shown that
households do not generally have
a habit of planning their savings,
and a considerable proportion of
them keep their savings outside of
the formal financial system. Close
to 30 per cent prefer investing in
gold or other such assets, with the
ultimate goal of buying a house”.
But, when savings are kept outside
of the financial system, they
cannot be funnelled back into the
economy to finance investments.
This, combined with a decreasing
trend in household savings,
exacerbates Turkey’s current
account problem, she explains.
Insufficient and/or irregular income
can, of course, be one of the
reasons why so many consumers
do not have a formal saving plan.
Yet, Ms Karakurum-Özdemir
continues, the joint research from
the World Bank and the Ministry
of Development shows that some
consumers simply do not have
enough knowledge of the financial
instruments available to them, nor
do they know where to go to get
objective advice.
Ms Engin Basaran, then-President
of the Consumers’ Association,
one of the leading consumer NGOs
in Turkey, suggests that banks
may be partly responsible for this
outcome. She says that, due to
what they see as ‘unfairly high
banking fees’, some consumers
feel that they are being taken
advantage of and therefore
avoid financial institutions. Still,
she also acknowledges the
important role that banks play in
Turkey’s economy and calls for
closer cooperation with financial
institution and other stakeholders,
insisting that consumer education
is too big a task to be left to
consumer groups alone.
Mr Soner Canko, then-Executive
Vice President at Ziraat Bank,
Turkey’s largest and state-owned
bank, says that, in general, banks
are placing great importance on
financial education and putting a
lot more effort into informing their
customers about their products
through multiple communication
channels. Mr Canko also
acknowledges the need for closer
cooperation among stakeholders
and offered to hold meetings with
NGOs to identify ways to improve
cooperation.
As the Audit Director of the
General Directorate of Consumer
and Competition Protection,
Turkey’s primary government
agency responsible for consumer
affairs, Mr Yakup Güzel sees
an equally important role for all
stakeholders in educating the
consumer. Mr Güzel says that
the government had three main
responsibilities, namely regulating,
auditing and creating awareness
about the issue. But, he also called
on other parties to assist in the
education effort. In particular,
he suggests that the media and
financial institutions should do
more to inform consumers. He also
feels that the Ministry of Education
has a duty to include financial
topics in the national curriculum.
Assistant Professor Hüsne
Demirel, an academic at Gazi
University Faculty of Vocational
Education, agrees. As an educator,
she sees financial education as
a critical life skill that should be
taught in all primary and secondary
schools, in order for students to
be equipped with the necessary
knowledge to make informed
financial decision as adults. Citing
some such curriculum changes
that had been made in other
countries, she stresses the urgency
and importance of making financial
topics a part of formal education.
8
An International Perspective
This view is certainly in line with OECD’s
recommendation that “Financial education should start at
school, for people to be educated as early as possible.”
This view is certainly in line with
OECD’s recommendation that
“Financial education should
start at school, for people to be
educated as early as possible.”5
The Ministry of Education is
reportedly working on developing
a financial education curriculum.
Yet, integrating new topics,
especially those that are fairly new,
like financial awareness, into the
formal education is not necessarily
an easy task.
Ideally, an entirely new
educational programme should be
created from scratch, and should
take into account feedback from all
stakeholders; and then educators
must be trained to ensure effective
implementation. Both of these
steps take time, even when there
is strong political support.
Experience from the United
Kingdom is indicative of the
challenges ahead, but also offers
some best practice. Wendy Van
den Hende, CEO of the Personal
Finance Education Group (PFEG),
has been involved in financial
education for 15 years, and the
programmes in which she has
been involved have reached an
estimated 1.8 million students, via
programmes in 4,250 schools.
Ms Van den Hende emphasises
the importance of involving the
teachers in the process and
ensuring that they are equipped
with the necessary knowledge: “If
we want long-term, sustainable
financial education, we should
go directly to the teachers in the
schools, educate them in this
5 - OECD, “The OECD Project on Financial Education”, http://www.financial-education.org/dataoecd/8/28/44409678.pdf
aspect, and develop courses
together. It is they, after all,
who spend the most time with
the children and have the best
understanding of them.” Ms Van
den Hende is also a strong believer
that financial education should be
adopted as a government policy.
For a considerable time, she has
lobbied for financial education
to be included in the national
curriculum. However, as the
political landscape changes, so too
do the political priorities, and an
anticipated legislative change on
the issue has now been delayed.
Yet, she emphasises the need
to carry on despite temporary
setbacks and argues that, by
taking leadership, individual
parties can keep the debate alive.
9
What Next?
National Financial Education Strategy
Mr Cihan Aktaş, Executive Deputy
Director of the Banking and
Financial Institutions Department
at the Central Bank of the Republic
of Turkey, confirms this view. He
explained that the Central Bank
has been putting considerable
effort into the issue. For example,
the two-day conference which
it organised in partnership with
the Capital Markets Board was
the most far-reaching initiative
from any government agency. The
Bank also represents Turkey at
the OECD’s International Network
on Financial Education (INFE)
National Strategy for Financial
Education Subgroup. Considering
that Turkey is the only country
among the fifteen member
countries of this subgroup which
does not have a national strategy
for financial education, Mr Aktaş
suggests that the situation needs
to be urgently addressed. To
achieve this, he says, the Central
Bank aims to create awareness
about financial education among
relevant stakeholders and rally
them towards creating a national
strategy. Mr Aktaş also underlines
the importance of government
support and guidance. He suggests
that government agencies should
take primary ownership of this
issue but, in doing so, it is also
important for them to have political
support.
in terms of its economy and its
population – and, as the global
crisis demonstrates, financially
educated citizens contribute to a
country’s wider economic wellbeing. The conference has shown
that stakeholders are well aware
of the importance of the subject
and ready for closer cooperation.
They also agree that more political
support is required in order to
take things to the next level.
Developing a national strategy
for financial education, led by the
government but with the input of
all stakeholders, would probably be
the right next step.
Conclusion
It is encouraging that financial
education is starting to get the
attention it deserves in Turkey.
Although the country is not late
in the process when compared
to other emerging economies, it
is imperative that the necessary
steps are taken quickly. After
all, Turkey is growing fast – both
10
Berna Ülman
Kamer Karakurum Özdemir
Visa Europe Senior Vice President and Regional Manager
Senior Economist, World Bank Turkey Office
“As the leader in the electronic payment industry,
we have been encouraging our entire sector to
engage in financial literacy and financial awareness
subjects.”
“Households do not plan their savings. We see
that keeping savings outside of the formal financial
system is fairly common.”
Cihan Aktaş
Hansın Doğan
Vice President for Banks and Financial Institutions, Central Bank of
the Republic of Turkey
Programme Manager, United Nations Development Programme Turkey
“Our biggest expectation [from stakeholders] is to
create awareness through platforms such as the
Visa Europe initiatives.”
“We, as the United Nations, aim to bring a
standard to corporate responsibility projects. We
think the ‘I Can Manage My Money’ project is an
excellent programme that meets those standards.”
Soner Canko
Engin Başaran
Assistant General Manager for Banking Operations, Ziraat Bank
(now General Manager, Interbank Card Centre)
President, Consumers’ Association (now Honorary President,
Consumers’ Association)
“We inform consumers through modern
communication techniques as well as marketing
and media channels. We realise that we have a
responsibility to act before problems become
chronic.”
“We need to ensure that consumers have the
awareness to act responsibly and also have the
necessary financial skills”
Yakup Güzel
Yrd. Doç. Dr. Hüsne Demirel
Audit Unit Coordinator, Customs and Commerce Ministry, Directorate
General for Consumer Protection and Market Monitoring
Assistant Professor at Faculty of Vocational Education, Gazi
University
“State has three main functions in this regard:
Legislation, monitoring and building awareness.
Yet, all stakeholders need to participate in
educating the consumer”
“Financial literacy levels are well below average for
those with low levels of formal education and low
income groups.”
Visa Europe Representative Office in Turkey
Eski Büyükdere Cad. Apa Giz Plaza No:191 Kat: 19
34394 Levent - İstanbul / Turkey
www.visa.com.tr
Tel: +90 (0) 212 386 30 00
Fax:+90 (0) 212 386 30 30